Eli Lilly (LLY 0.99%) is one of the hottest pharmaceutical companies in the world. The company is quickly gaining steam in the weight loss market thanks to its blockbuster drug, Mounjaro, and its sibling treatment, Zepbound.
In addition, earlier this month a group of external advisors to the Food and Drug Administration (FDA) endorsed the use of Lilly's Alzheimer's candidate, donanemab.
While this was encouraging, Lilly just unveiled even more good news. The company is teaming up with OpenAI in an effort to spearhead its drug discovery efforts.
Let's explore why this is a big deal, and how generative AI can play a major role in the future of patient care.
1. AI has enormous potential in the healthcare space
Right now, much of the artificial intelligence (AI) narrative is reserved for the technology sector. Whether it's cloud computing, e-commerce, advertising, or workplace productivity, AI has the potential to completely revolutionize these applications.
With that said, one under-the-radar pocket of the AI realm is healthcare. But AI's potential in the healthcare sector should not be underappreciated.
The technology has the ability to assist in clinical trials as it relates to data management, as well as understanding patient care in a hospital setting. According to Statista, the market size for AI in the healthcare sector could reach $187 billion by 2030 -- up from just $28 billion today.
Moreover, Ozempic maker Novo Nordisk revealed that it was building a supercomputer powered by Nvidia earlier this year.
Image source: Getty Images.
2. How OpenAI can help Eli Lilly
Per the company's press release, Eli Lilly is teaming up with OpenAI in an effort "to invent novel antimicrobials to treat drug-resistant pathogens."
According to the World Health Organization (WHO), bacterial antimicrobial resistance (AMR) was responsible for 1.3 million deaths worldwide in 2019 and was a contributor to about 5 million deaths.
Obviously, bacterial AMR is a serious issue and one that affects patients around the world. The World Bank estimates that treating AMR could cost $1 trillion by 2050, and lead to as much as $3.4 trillion of gross domestic product (GDP) losses by 2030.
Using OpenAI's technology, Eli Lilly could begin to set the tone for novel treatments for those affected by AMR. Not only could this lead to groundbreaking discoveries and potentially new medicines, but it also could pave the way for Lilly to form new strategic partnerships with other pharmaceutical companies or even federal agencies.
As a result, Lilly would be in a good position to diversify its current portfolio all while improving patient care on a global scale.
3. Does the OpenAI deal make Eli Lilly stock a buy?
Lilly stock popped about 2% on the news of its partnership with OpenAI.
Although this deal alone does not make Lilly stock a buy, I see the development as an important step in the company's future. Right now, Lilly offers leading treatments used for weight loss, cancer, plaque psoriasis, arthritis, and more. Additionally, as I alluded to above, the company has its sights on treating Alzheimer's as well.
While I suspect that any progress the company might make in combatting AMR is years away, this could ultimately prove beneficial. My thinking is that if Lilly starts to make reasonable progress related to its AMR research, it's entirely plausible that the company could begin leveraging OpenAI for other applications. As such, Lilly could quietly emerge as a subtle AI opportunity.
Of course, this is all speculative from my point of view. However, the bigger idea here is that AI is being increasingly used by healthcare's largest enterprises -- and rightfully so. I'd encourage investors to monitor Lilly's earnings calls in the coming quarters and note if management addresses its relationship with OpenAI and its impact on the business.
